Tips and trends for insurance and brokerage firms in 2017 to get away from high risk
The World Economic Forum, an international non-profit foundation, published The Global Risks Report for 2017. The report is based on the global risk perception survey (GRPS), and was unveiled at an event hosted by Marsh & McLennan and Zurich Insurance.
The report highlights a core problem that nations have to address -- the increasing disparities in income and wealth worldwide. This calls for a focus on accelerating economic evolution and reforming capitalism. The citizen's burden of contributing to social security will have to be transferred to government and businesses. It also points out that old age is on the rise, jobs are being disrupted, and the financial sector growth has been weak for over nine years. Life insurance is a must for financial protection and there has to be a paradigm shift in the way the protection is planned and calculated.
In the near future, increasing polarization and intensifying national sentiments are set to cause an imbalance in the society. Countries are looking at safeguarding national interests, and not the world at large. With political surprises or shocks, civil disturbances, and terrorist attacks; each country is inward focused. This has led to lack of multinational cooperation, discriminating G20 trade policy measures, rise in refugees, and international migration.
Managing technological change
Artificial intelligence (AI), robotics, biotech, new computing technologies, and nano technology will revolutionize the way risk is assessed. Though there is fear of losing jobs, technology players need to emphasize on how talent can be re-utilized to upgrade skill sets of employees to manage the modern enterprise. Enterprises will start investing toward building expertise and nurturing ideas for new solutions. Such efforts will also be powered by disruptions happening in geoengineering, space technology, blockchain, Internet of Things (IoT), and 3D printing.
Today, we are able to influence insurers and risk takers through our capability to calculate risk accurately. Soon, the high accuracy of risk assessment, powered by big data and IoT technologies, will alter the risk categories being covered. Insurance and risk writing industry is set to redefine the kinds of plans and services. Let us take an example of self-driving cars: In this case, the risk will pass on to the software partner from the manufacturer and data ownership could be debatable. Cyber insurance and security services are the trends to watch out for and with blockchain, there is no room for fraud.
Finally, here are some suggestions for risk writers: Risk management is key for organizations and you need to invest to mitigate risk, optimize tech deployment, deepen relationships, and nurture reputation within and outside the organization. The risk management approach has to be holistic and you need to take control of happenings like Brexit and US elections, and plan ahead. You have to grasp the profile, identify the sources of risk, run scenario analysis, simulate, and assess financial and reputation impact and find a solution to remediate. The risk strategy and business strategy are to be interlinked and cascaded to organization / risk manager.
On the other hand, here is an opportunity for an insurer: You need to pay attention to risk, engage with customers, and find options to mitigate. Insurers need to on-board the risk and create a value proposition to mitigate risk through knowledge and skill sharing. Biggest watch point this year is the geo-political risk and the insurance companies need to be prepared to assess the willingness and cooperation of countries and not disturb the economy of the world.